Does Infficiency Fiscal and Human Capital Affect on Poverty in Aceh Province, Indonesia? A Threshold Apporach

Poverty is a significant social issue that affects all countries, including Indonesia. The various shortcomings and helplessness experienced by those living in poverty highlight this problem. The government considers poverty a severe issue that requires attention every year. Although the government has implemented several measures to alleviate poverty, reducing or eradicating it is challenging due to the numerous dimensions involved. This study investigates the impact of inefficiency fiscal on poverty in 23 districts/cities of Aceh province. Socio-macroeconomic indicators such as education as proxy human capital, economic growth, and inequality are also examined. This research uses balanced panel data from 2011 to 2020. Research data on remaining government spending comes from the Directorate General of Fiscal Balance (DJPK) of the Ministry of Finance. In contrast, education, economic growth, inequality, and poverty come from the Central Bureau of Statistics. The analysis used is the threshold panel. The study results found that education had a negative effect while inequality had a positive effect. The threshold test results on the unspent fund found an optimal value of 1.725 percent. If the remaining spending is above the threshold, poverty will increase, and vice versa. If the remaining spending is below the threshold, then poverty will decrease. Based on these findings, it is necessary to increase the length of schooling, reduce inequality, and increase efficiency (according to planning).